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Thursday, 5 September 2013

Prince and The (Sheffield) Revolution

The several hundred Blades fans at Scunthorpe for the Johnstone's
Paint Trophy tie were still in dreamland. "We're so rich it's
unbelievable!"…"Shall we buy a ground for you?" The announcement
that morning of the purchase of 50% of the football club by Prince Abdullah bin
Mosaad bin Abdulaziz Al Saud had left most fans slightly shell-shocked, as the
media bandied around million/billion pound figures of the Prince's net worth. Yet
underlying the braggadocio of the chants was an inherent nervousness; a feeling
of disbelief, that this cannot really be happening at Bramall Lane.

To those surprised by this edginess you only have to look
back at a list of United's previous chairmen and some of the potential owners
who, thankfully, never got their hands on the club. From the country's biggest
white collar fraudster, to an Iraqi businessman later to undergo gender
realignment - before a subsequent reversal. From a chairman subject to an
international arrest warrant to a fugitive still on the run from Interpol and a
London socialite known as "The Count" who had indirect connections to
Libyan arms dealers. Then throw in the tempestuous time when Charles Green acted as Mike McDonald's axe-man.

During Kevin McCabe's reign as chairman and owner there has
been the rebuffed interest of Singaporean businessman Joe Sim, as revealed in a
Channel 4 Dispatches investigation, the interest from Malaysian Vinod Sekhar
(who survived a bankruptcy claim in his own country) and the recent revelation
from Kevin McCabe that he turned down an offer to buy the club from Carson
Yeung back in 2007. Who can blame fans for being a little cautious?

You only have to look elsewhere to see the case for caution
strengthened; Venky's at Blackburn Rovers, Cardiff losing their identity and
history, Hull City Tigers, the problems caused by consecutive owners at
Portsmouth, both Liverpool and Villa finding that big money US takeovers are no
guarantee of success.

I think in the case of United the retained interest of the
McCabe family, owning the other 50%, should give us comfort; acting as custodians
of the club's past present and future. For the deal that has been done, Kevin
McCabe and his family deserve credit. Both he and the Prince have been quick to
reassure us that the focus on the club as part of the community and its rich
history is, and will continue to be, respected.

But despite the seemingly beneficial nature of the deal and
an outcome most fans would seem happy with, it doesn't mean to say that we (as
fans) didn't have the right to question what had gone before. Many fans (and
this blog) have questioned the true motives regarding the transfer of theground and other assets into the Scarborough owned plc. and the losses incurred
in acquiring and running overseas clubs in geographies seemingly motivated by
real estate opportunities than burgeoning football interest.

The separation of stadium/hotel/academy from the football
club remains a risk, although there is less talk of an exit plan from the
McCabe family which gives some comfort. His stated motives at the time of the asset
transfer; of creating an easy investment in a "clean" football club,
free of debt and other costs appears to have worked. Whether you see that as
clever move that has paid off or someone that has struck lucky is up to you.

At the time I struggled to see the desirability of such a
deal for an investor and any return for the Prince can only really be realised
by two promotions. It may be that he believes this is achievable and for a £1
up front cost that may be a risk worth taking for a man who professes to love
football so much. For the McCabe family they retain their sole interest in the
fixed assets of the club, a significant amount by which to secure and recover some of the multi- million pound
investment over their tenure.

Too many times in the past, fans have sat back and accepted
that people are acting in the best interests of their club without questioning
the true motives. That lack of curiosity, the absence of a questioning
approach, the willingness to take everything at face value has left some clubs
in dire straits. Yes it was Kevin McCabe's money that was used to plug the
holes left by poor decision making; yes he funded the follies and legacies of apparently
trusted lieutenants in Terry Robinson and Trevor Birch, but over that time
considerable finance was provided by the supporters. There needs to be acknowledgement
that fans are stakeholders (both financial and emotional), something that fans'
pressure groups are ensuring that clubs recognise, particularly outside the
Premier League and at those clubs where the parachute payments have expired and
times are leaner.

If you doubt this, consider the amount of turnover generated,
both directly and indirectly by supporters of Sheffield United. In the financial
statements to 30 June 2012 gate receipts accounted for £4.5m of United's
turnover of £10.3m. Sponsorship, royalties, merchandise and advertising (much
of it funded by fans as well) accounted for a further £3.6m of the £10.3m. The
fact this barely covered half the costs is due to decisions made by the owners
and board of directors. The club kept a Premier league infrastructure for too
long and gambled heavily in the wrong areas. The McCabe family got in too deep
and have fought to extricate themselves from it, at great cost.

Never underestimate the fans' input into the financial well-being
of a football club; whether it has a benefactor or is run as a fans' trust or
community club. Football without fans is nothing. Yes McCabe has put in close
to £90m during his reign a large proportion of his wealth, but what about the
fan that spends upwards of £2,000 a year following his team home and away? That
could be up to a quarter of some fans' net annual earnings. A not inconsiderable
amount, unconditionally spent and often in blind faith.

So how will the injection of Saudi millions affect United
going forward? The answer is that it is difficult to predict. Getting out of
League 1 this season is far from certain. In David Weir we have a manager
trying to impose his ideas on a squad of players that is gradually evolving into
his team and he has lost the key player that his pre-season preparation and
4-2-3-1 formation was built around - Kevin McDonald.

On his appointment in the summer I stated he would need time
and that promotion may have to wait for a season, whilst the squad is
over-hauled and he builds a strong team with the work ethic and style he
demands. Even with an injection of money I don't see that changing. It still
looks like we have square pegs in round holes and although you can see what Weir
is trying to achieve, the pretty passing is only getting us so far down the
pitch and a lack of goal threat, never mind goals, is a concern.

Sadly fans are getting impatient already and defeat at
Rotherham on Saturday could leave United in the bottom four. If the fans get
twitchy, will the new joint owner exercise restraint? Interestingly, in an
interview with Radio Sheffield Kevin McCabe referred to the Saudi money being
used on improving the playing side "and better management staff, perhaps".

Another factor in limiting the impact of any cash injection
is the Financial Fair Play rules. While ever United are in League 1, salaries
will be limited to 60% of turnover. This means that any money will be used on
transfer fees for players that will still need to fit in with the existing wage
structure that will not take the wage bill over the cap.

I have seen some Blades criticising the timing of the announcement,
just after the transfer window closes, but I suspect with the limitations on
wages we were limited in what we could achieve with the cash anyway. It is also
worth bearing in mind we have paid fees for Lyle Taylor, Jose Baxter and
Florent Cuvelier, which could well be a sign of monies being advanced ahead of
the official announcement.

Yes there are ways around the rules, through creative
sponsorship and advertising deals, but the need for a financially sustainable
club has been emphasised as an objective in the past and certainly appears to
be something the Prince is keen on in initial statements. That money is not
frittered away without good reason and having a club that balances its books
will be important if promotion is achieved.

The differing FFP rules will have a different impact if and
when United achieve reach the Championship. From this season clubs must
restrict their losses to a maximum of £3m, however if an owner is willing to
convert the losses to equity (without funding this via borrowing) the limit
increases to £8m; in effect costing the owner up to £5m. The limits reduce year
on year and by 2015-16 will be £2m or £5m if the difference is converted to
equity.

This could be a reason for the lack of funding across the city
where Wednesday (reportedly making losses of £5m a year) spent little in the
transfer window. At a time when he is actively trying to sell the club, Milan Mandaric
would risk increasing his asking price considerably or being required to invest
money he may never recover. Let's not forget in the last financial statements
United were making a loss of £13m and whilst this year's results are yet to be
announced they will do well to have halved that deficit.

Concerns have been expressed that the Prince is not as
loaded as the inflated figures first reported, personally worth £93m according
to Forbes, yet the reality is that it may not need a significant amount of that
wealth invested in United over the next couple of years. In an interview, post
announcement, Simon McCabe said the expectation and objective was that it would
take £20m and three years to get back to the Premier League. My fear is that is
asking too much too soon; at the very least a promotion this season, or back to
back promotions from League 1 to the Premier League. Oh for the heady,
pre-Premier League, days of 1988-1990 when we achieved this under Dave Bassett.

Significant overseas money is no guarantee of success or a
return to the Premier League; just ask Leicester, Nottingham Forest, Blackburn
Rovers, but I guess there is little harm in setting targets and showing some
ambition. The club may need to carefully manage expectations though, especially
when the initial buzz of the investment has died down.

The Prince is reportedly a big fan of Fantasy Football. Most
people I know who play Fantasy Football lose interest part way through a season, when
the transfers haven't paid off and they
are too far adrift of the prize money in their local league. Let's hope that he
doesn't lose interest if the three year plan is delayed and that he is in this
for the longer term as promised. This isn't fantasy football; it is real life,
with real people, real employees and real stakeholders.